international Management Flashcards
In what setting do we study about a business in this chapter?
Global
In different country situations, POLC becomes more
challenging
As trade barriers fall, communication becomes faster and cheaper, and consumer tastes are converging, businesses become a more
unified global field
The reality of borderless companies means consumer can no longer
tell which country they are buying fom
What is international business?
Business activities of ay firm that
involve the movement of resources across national boundaries
What kinds of resources are moved across national boundaries?
raw materials semi-finished goods finish goods services capital people technology
A firm in international business has to
export or import products from other countries
The world now is truly an integrated
global economy
In a global economy, more firms both large and small are becoming
international businesses
What is international management?
management of business operations conducted in more than 1 country
The basic management functions in a national or international company is the
is the same
What is an MNC?
corporation that owns businesses in 2 or more countries
receives more than 25% of its total sales revenue from operations outside the parent’s home country
What else does a MNC consist of?
subsidiaries
manufaturing facilities
throughout the world
How is a MNC managed?
integrated worldwide business system
What is a home country?
country in which an organisation’s HQ is located
What is a host country
A foreign country in which an organisation is conducting business
An international manager must assess the international
business environment
We must assess the international business environment for
opportunities
threats
manage different kinds of risks
What do the environmental factors determine in international business operations?
direction
purpose
What are the environments we look at?
PEST political-legal Economic social-cultural technological
In political-legal environment, what must international firms deal with? What are their major concerns?
unfamiliar political systems
government supervision
regulations in international operations
political risk
political instability
laws and regulations of host country
What are political risks?
government actions or
politically motivated events
result in a company losing its assets
earning power or managerial control
Political risks can come in the form of?
Nationalisation
Expropriation
Acts of violence against MNC’s properties or employees
What is nationalisation
forced sale of MNC’s assets to local buyers
What is expropriation
local government seizes foreign-owned assets of MNCs, providing inadequate or no compensation
What is political instability
events which affect the operations of an international firm
What kinds of political instability are there
riots
revolutions
civil disorders
government upheavals
What do international firms need to learn about in the host country? What do they need to do?
laws and regulations that affect them
obey them
What host government laws are there?
ownership restrictions on operations consumer protection employment product safety and standards wages taxation product labelling
International firms must pay attention to key economic variables to reduce
economic risk
What are the key economic variables?
economic development and growth inflation rate taxation rates size and trend of foreign investment infrastructure resource and product market quality and size of labour market wage rates exchange control foreign exchange rates
The international firm needs to assess both current economic conditions and
forecast future conditions
The countries that they need to carry out economic assessment include countries they
operate in
sell to
purchase from
What is a country’s infrastructure?
the facilities needed to support economic activity
What do we assess in evaluating infrastructure?
cost of operations
ease of operations
What are examples of infrastructure?
transportation systems
communication systems
power plants
schools
What does a nation’s culture include?
shared knowledge social values beliefs language religion education attitudes social organisation
What do international managers face when they cross national boundaries to work in a culture different from their own?
difficulty
What does cultural and national differences influence?
attitudes
expectations
When attitudes and expectations differ in different cultures, what is affected?
work behaviour of individuals and groups in host country
Because of different cultures, what do managers need to develop?
Cultural sensitvity
What is cultural sensitivity
ability to anticipate and accommodate behavioural differences in different societies
For a higher chance of successful international mangers, what do firms have to do?
Pay attention to language
Cross cultural training
dealing with family issues
For technology, different countries have different
levels of technology
Different levels of technology affects the
nature of markets
ability of companies to conduct business
To increase their technology in their own country, they promote
technological transfer by encouraging FDI (foreign direct investment)
How do countries entice international firms to build new factories in their countries
tax and other incentives
Some countries have a condition for companies if they want to transfer technology and operate there. What is it?
they must be eager to access their resources
consumer
What are some technological factors?
Maturity of technology
technological advancements
role of the internet
government spending on info-communication technologies
Why do companies go international?
To gain access to more reliable or cheaper resources
to increase market share
to avoid foreign tariffs and import quotas
What kind of companies venture overseas to find cheaper resources? What is the resource?
Manufacturing
labour
What kind of companies go international to find more reliable and cheaper raw materials?
Petroleum
mining industries
What does it mean to increase market share?
To continue growing
Why does a company expand into international markets?
to continue growing
enhance competitive position in industry
Why do governments use tariffs or import quotas?
to protect domestic business concerns
What can overcome barriers like tariffs or import quotas?
direct investment
what is a tariff
a type of trade barrier in the form of
customs duty, tax, levied mainly on imports
What is an import quota
a type of trade barrier on the amount of a product that can be imported over a given period of time
How do companies enter international markets?
Exporting Licensing Franchising Joint ventures Wholly-owned subsidiaries
‘How companies enter international markets’ is also known as
market entry strategies
What is the most common way of doing business abroad?
exporting
What is exporting
company maintains its production facilities in home country
transfer its products for sale to foreign markets
What are the advantages of exporting?
market product in other countries at small expense, limited risk
Why is exporting also less expensive?
no commitment of capital to building plants in host country
What are the disadvantages of exporting?
exporters face problem physical distances government regulations foreign currencies cultural differences
What is licensing?
agreement
licensee pays licensor
What is the payment that licensee pays called?
royalty payments
After paying, what is the licensee allowed to do?
produce its product
sell its services
use its brand name in a specific foreign market
What are the advantages of licensing?
avoid trade barriers
does not have to commit substantial financial resource to develop foreign markets
What is the disadvantages of licensing?
diminished ability to enforce/control the quality of product by licensee
The disadvantage is that Licensees can eventually become
competitors
What is franchising
special form of licesning
What does the franchisor provide franchisees with?
a standard package
The standard package that franchisees are given include
products
marketing
management systems
These systems that franchisors provide with have proven themselves
successful in the home coutnry
In what industries are franchising successful.?
fast-food
hotel
retailing
recreational services
What are the advantages of franchising?
franchisor relieved the costs and risks of opening a foreign market on its own
build global presence quickly
What are the disadvantages of franchising
lacks ultimate control, depends on franchisees’ commitment and performance
considerable effort put into developing an appropriate training manual which must be adapted for cultural differences
What is a joint venture?
establishing a firm
jointly owned by 2 or more firms in host country
What do the joint owners do together?
develop new products
build a manufacturing facility
set up a sales and distribution network
What is the advantage of joint venture?
benefits from local partner’s knowledge of host country
cost and risks of opening up in foreign market is shared by local partner
Things that the local partner can know about in a host country are
competitive conditions culture language political systems business systems
What is the disadvantage of a joint venture?
risks losing control of technology to partner
conflicts and battles for control
There are conflicts and battles for control in a joint venture if
goals and objectives of partners change
take different view of what the strategy should be
What is a wholly owned subsidiary?
operation on foreign soil
totally owned and controlled by company with HQ outside host country
How can wholly-owned subsidiaries be established?
acquisitions
start-ups
What are the advantages of wholly-owned subsidiaries?
reduces risk of losing control over firm’s technological competence
exercise tight control over operations in different countries
what is the disadvantage of a wholly-owned subsidiary?
most costly method of serving a foreign method
Why is a wholly owned subsidiary costly?
bear full costs and risks of setting up overseas operations
What is planning?
basic process
select goals
determine how we achieve them
The typical goals of a domestic business and MNC are
survival
profit and growth
However, the goals of an MNC may clash with the goals of
economic and political systems of host countries
Most countries’ goals include
improved standards of living
trained workforce
full employment
steady economic growth
It is good when the goal of MNC and goal of country
overlap
It is bad when the MNC is not achieving the goals at the
rate expected by host country
For MNCs, how are strategic plans developed?
originated in home country
formulated through intensive communication with international divisions
For MNCs, how are tactical plans developed?
delegated to international divisions
In organising, what must the organisation structure be designed to do?
meet needs of international environment
What are the international organisational structures?
international division
worldwide functional divisions
worldwide product divisions
geographical reions
What is an international division?
separate division is create to which all foreign subsidiaries report
What is a worldwide functional divisions
manager in charge of a particular function has worldwide responsibility
What is a worldwide product division
manager is responsible for particular product categories worldwide
What is geographical region
divided into regional divisions
subsidiaries reporting to appropriate division according to location
What is leading
influencing people
guiding activities of organisational members
What activities are involved in leading
motivating
communicating
managing teamwork
why is influencing people in international companies more complex?
culture factor
How do international managers become successful in leading?
acquire working knowledge of languages used in host countries
understand their attitudes
understand the needs that motivate the peopl
Why is acquiring a working knowledge of the languages used in host countries important?
influencing activities involve communication
In different attitudes, managers have to be
flexible in adapting to the prevailing attitudes of the host country people
In developed countries,
people’s basic needs are fairly well satsified
managers satisfy esteem and self-actualisatoin
In developing countries, managers need to
appeal to basic human needs
What is controlling?
process of comparing
actual performance with standards
taking corrective action
Why is controlling complicated in MNC,
geographical separation of foreign subsidiaries
increased distance, difficult for managers in home country to keep watch on operation
What is required for managers to have the knowledge to make timely and proper decisions?
extensive management information system
What kinds of cultures are there?
high context
low context
the context is also known as the
social environment
surroundings
in which business transaction takes place
the level of context shows the emphasis on
social environment
In high context cultures, people use communication to
build personal social relationships
In high context cultures , what is valued?
trust and relationship
welfare and harmony
In low context culture, people use communication to
exchange facts and information
What is important in a low context culture?
business transactions
individual welfare and achievement
In a high context interation, more times is required before business partner feels
comfortable in talking about business dealings
What countries have high-context cultures?
Asian
Arab countries
Latin America
African
What may be expected in high context cultures?
gifts
Low-context cultures tend to be
American
Northern European
In a low-context culture, it is unethical to
receive gifts to seal the business deal
What do low-context people need to do with high-context people?
suppress their impatience
devote time to establish personal social relationships
